Brookfield REIT, NY Pension Fund Nab $155M Refi on Houston Mall

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Brookfield Property REIT and the New York State Common Retirement Fund have refinanced debt on their 1.52 million-square-foot Willowbrook Mall in Houston, with a $155 million commercial mortgage-backed securities (CMBS) loan originated by Morgan Stanley, according to analysis from Moody’s Investors Service

The two-year, first lien and non-recourse mortgage loan is collateralized by the joint venture’s fee simple interest in a 536,186-square-foot portion of the mall, an enclosed super-regional retail outpost located at 2000 Willowbrook Mall in Houston. The mortgage includes three one-year extension options, per Moody’s, which values the property at a little over $169.9 million. 

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The debt will be securitized in the BPR Trust 2021-WILL single-asset, single-borrower CMBS deal. The loan closed last week, and has a full-term maturation date of June 9, 2026, according to Moody’s. 

Brookfield Property REIT is an affiliate of Brookfield Property Partners and Brookfield Properties Retail Group, the mall’s property manager, which is headquartered in Chicago and is controlled by Brookfield Asset Management. The New York State Common Retirement Fund is the third-largest public pension fund in the U.S., which provides benefits to more than one million people from New York state and local government; the fund has about $200 billion in assets under management, around $15.7 billion of which is in the realm of real estate, as of March 2020. 

Built in 1981, the mall is a single-story facility situated on more than 123 acres about 22 miles north of Houston’s central business district. It has a five-year average historical occupancy rate of 98 percent, but like most retail real estate during the pandemic, it was hit pretty hard. 

The property’s occupancy rate sat at 86.5 percent at the end of March 2021, with the asset hosting more than 90 “small shop” retailers, according to Moody’s, which indicated that its “economic vacancy” — which excludes bankrupt tenants still occupying space and paying rent — was a meager 83.8 percent.

Still, within the collateral that secures this financing, there’s a Dick’s Sporting Goods in 73,250 square feet and a Nordstrom Rack that operates out of 38,111 square feet. Other, non-collateral anchor tenants, representing more than 809,700 square feet, include a Macy’s and an affiliated Macy’s Men’s store, a JCPenney and a Dillard’s, according to Moody’s. 

There is a Sears-owned vacant anchor box and larger parcel at the mall with “valuable developable land connected to the mall” that Moody’s believes could possibly be bought back by the borrowers. 

H&M, Zara, Old Navy and Victoria’s Secret are all tenants that occupy more than 10,000 square feet at the mall, which also sports such clothing stores as Express, Abercrombie & Fitch, and a House of Hoops by Foot Locker. Other shops include Sephora and Bath & Body Works, Apple, Lego, as well as a range of food and beverage options. Lego just opened at the mall last fall. 

Around $36 million worth of funds for capital expenditures was pumped into the mall between 2016 and 2020. In 2016, $10 million was spent to add Dick’s Sporting Goods to the mall’s roster, while other work was done to spaces occupied by Zara and Nordstrom Rack. There were also investments made for improving the mall’s energy systems, charging stations, plumbing, roofing and lighting, among other renovations and upgrades, according to Moody’s, which estimated that about $5.3 million will be needed for future work to replace sections of the roof, make security upgrades and repave the parking lot.